Increasing Costs for Small Businesses

Posted by on January 30, 2015

Around 59% of small businesses are reporting increasing operation costs and over half of these say that it has been having a negative impact on their cash flow. These figures are coming from the Close Brothers Business Barometer, a quarterly survey of the UK’s small to medium sized enterprise owners and senior management from a wide variety of sectors on economic and financial issues.

Of those who have been impacted by increased operating costs, almost two fifths state that rising energy bills are creating the majority of the problem. However, just over a quarter say that the cost of stock and raw materials could be causing the most pressure on their cash flow.

“Operating costs have increased significantly over the past few years, and are arguably one of the most difficult things for small business owners to manage in the current climate.” Says CEO of Close Brothers Asset Finance, Mike Randall.

“We work with businesses across a range of sectors and we can see that they are all concerned about operating costs, which is unsurprising given the energy requirements, raw materials and machinery that many require.”

More than a third of firms have said that despite their direct costs increasing, they feel unable to pass any of this on to their clients.

'This is a situation that is leading to increased pressure on already-tight margins and it is entirely possible that operational costs will continue to rise for the foreseeable future,' adds Randall.

His advice is that if you haven’t thought about your business finances for a while, then this could be a brilliant time to ensure that your funding system is structured well enough to cope with this strain on cash flow.

Smaller firms are being held back by a ‘cost of doing business crisis, according to the director-general of the British Chambers of Commerce. High energy bills, the rising cost of business rate and the difficulty of securing loans are choking off investment.

He says, “I see businesses that have turned down orders as they simply haven’t got the resources to fulfil them and it's such a shame."